24 Apr The Long And Painful Decline Of The Hospital Has Begun
Distress signals are starting to sound in two of the country’s major sectors, retail and healthcare. Last week, the discount shoe retailer Payless ShoeSource filed for Chapter 11 bankruptcy and announced it will close 400 brick-and-mortar stores throughout the United States and Puerto Rico. The announcement comes on the heels of a seemingly unending parade of bad news from traditional retailers in recent months. So far this year, Walmart, Macy’s, J.C. Penney among others, have all announced significant store closures. Ralph Lauren is shuttering its flagship Polo store, a foot-traffic magnet on tony Fifth Avenue in Manhattan, the latest step in a massive cost-cutting effort. Big-box office supplies stalwart Staples is reportedly considering putting itself up for sale.
Analysts who study the retail sector are pretty much unanimous in their assessment of what’s ailing traditional retailers: There are just too many big-box stores and hulking suburban malls in the U.S., especially given the growing dominance of online retailers like Amazon. And here’s little doubt that e-commerce companies have dramatically changed the retail industry, and delivered enormous gains in efficiency and productivity, and we are starting to see this trend in healthcare now.
Health systems across the nation are starting to experience some serious pain. Cleveland Clinic has just announced a 71% drop in operating income and while they are still turning a profit, others have not been so lucky.
An earnings report released last November revealed that Catholic Health Initiatives (CHI) had suffered a $483 million operating loss through the fiscal year. Like Cleveland Clinic, CHI saw its revenues rise, but expenses rose more quickly for the health system. Rising labor and pharmaceutical costs coupled with lower reimbursement from government payers and lower patient volume contributed to the poor financial performance.
The situation is also dire at MD Anderson Cancer Center. It suffered a $266 million loss in fiscal year 2016 before losing another $67 million in the first two months of fiscal year 2017. Again, it was an increase in expenses and a decrease in patient revenues that drove losses. Both CHI and MD Anderson have cut their workforces to cope with the drop in operating income. According Cleveland Clinic CEO Toby Cosgrove, this is a problem that afflicts most US hospitals with more than a half of hospitals (52%) losing money on operations in the last year.
Concomitant with the financial sustainability issues being experienced by hospitals, we are seeing one of the biggest shifts in healthcare delivery over the last few decades…the rise of telemedicine! Telemedicine is on the verge of rapid, widespread growth and adoption as the forces that have fueled its rise so far—mainly the growth of value-based care and patient convenient access— continue to gain momentum. Additional drivers are poised to push telemedicine’s expansion beyond what we’ve seen to date. The global telemedicine market is expected to expand at a compound annual growth rate of 14.3% over the next five years, eventually reaching an astounding $86.6 billion by 2020, a yearly increase of 20.8 percent over a five-year period.
These new drivers reflect broader forces at work: advances in telemedicine technology, evolution in legislators’ and regulators’ views of telemedicine, and providers’ and insurers’ relentless efforts to provide cost-effective care with high-quality results. This is amplified by the growing demand for convenience, innovation and personalized care among healthcare consumers around the world.
The hospital of the future is set to be platform based (think Amazon and Uber) …and it has arrived. Last year Mercy Virtual Care opened a first-of-its-kind facility that could redefine patient care. Providing care to patients both nearby and far—but none in the $54 million first-of-its-kind facility itself—330 specialized medical professionals monitor 2,431 patient beds, of which 458 are occupied by the critically ill. Physicians are seated at a console with six computer monitors filled with a wealth of data to enable them to better assist bedside providers. Secure web cameras allow them not only to see what’s going on, but also be seen by those on the other side, whether in one of Mercy’s traditional hospitals, a physician’s office, or in some cases, the patient’s home.
These more efficient digital hospitals are emerging as critical hubs in integrated healthcare networks, holding the potential to drive greater efficiency, improve quality of care, and provide access for more people than ever. Whether by newly built or retrofitted existing buildings, digital hospitals promise to boost efficiency and quality through better integration with all sources of care and enable deployment of eHealth systems to provide online information, disease management, remote monitoring, and telemedicine services that can extend the reach of scarce medical resources and expertise. Digital hospitals provide faster and safer throughput of patients, creating more capacity through process efficiencies, while containing costs.
Apart from digital hospitals, the platform based(or virtual) care delivery space is becoming a dynamic one and is quickly becoming crowded with competitors, and we can expect to see big shifts in the coming years as companies jostle for position and test new business models. Among the leaders are American Well which partners with health plans, employers, and delivery networks to bring telehealth programs to the market, Doctor on Demand targeting a demographic that includes mostly young women, and industry leader Teladoc which offers 24/7 access to U.S. board-certified doctors and pediatricians. Some companies, like Teladoc, are coming at the industry from the consumer side, helping patients and their caregiving networks coordinate care more efficiently. Others help health providers create collaborative solutions with their patients via virtual services.
Accelerating forces will continue to transform healthcare through cheaper, quicker and more convenient care delivery. And, as investment in virtual health services continues to accelerate, breakthroughs will disrupt the market, creating new social interactions and experiences. New, higher standards for service delivery will require organizations to shed the old ways of approaching healthcare, and rapidly accept the digital era. When this happens, hospitals as we know them will cease to exist.
FEATURED BLOGGER Dr. Rubin Pillay is a medical futurist and international expert in health leadership with a global reputation in innovation and 28-year career clinician & academic leader.
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